Debit cards have become more sophisticated since they were first introduced by card issuers. Some cards are linked to bank accounts to allow withdrawals, while others can be used to make store purchases, and some card issuers offer customers rewards for using their debit cards. In any case, customers need to read the fine print of their cardholder agreements to ensure they understand the many conditions that are usually attached to the use of debit cards.
A check card is a debit card linked to your checking account. It essentially replaces the need for writing checks because it can be used to make purchases or get cash, and the funds are deducted from your checking account. Some check cards are referred to as ATM cards because they can only be used to get cash, check your account balances and make deposits to a checking account at an automatic-teller machine. Other check cards have credit-card logos on them, but they're not credit cards. However, they can be used at store credit-card terminals to make purchases and get cash from your checking account. In any case, you should ensure you understand the terms for using a check card because some banks charge their customers fees for check-card transactions.
Prepaid debit cards also can be used to get cash and make purchases, but they're not linked to a checking account. However, prepaid cards are tied to an account into which a cardholder deposits money, which is known as loading the card. Cardholders usually go to a participating store or check-cashing business to reload their cards when their funds run low. Prepaid cards can come with several fees. For example, Walmart MoneyCard users generally pay a $3 fee to activate their cards, $3 to reload their cards and $2 for ATM cash withdrawals.
Some debit-card issuers offer cardholders cash-back rewards. For instance, cardholders might get 1 percent of their card purchases credited back to their accounts by issuers. Rewards cards usually come with several conditions, so it's important to read the issuer's terms to understand how you can earn rewards. Cardholders usually only get cash back for particular types of purchases, instead of for every purchase they make with their cards.
People sometimes prefer using debit cards to avoid accumulating credit-card debt and paying high interest rates on credit-card balances. However, the disadvantages of using check cards are revealed by the problems cardholders can face if their cards are stolen. Funds that are stolen from cardholders' checking accounts could leave them short of money to pay bills. Banks will restore money to customers' accounts if they're victims of fraud, but cardholders won't have access to their checking accounts or the cash in them until fraud issues are resolved.
- Nolo; Different Types of Credit and Debit Cards
- Bankrate.com; How to Earn Rewards Beyond Credit Cards; Lucy Lazarony; February 2010
- Bankrate.com; Don't Overpay for Prepaid Debit Cards; Constance Gustke; June 2010
- "Smart Money" magazine; Why Cash is the New Plastic; AnnaMaria Andriotis; November 2010
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